1099 Ruling Could Cause Big Headaches for Small Businesses

BizFilings Encourages Entrepreneurs to Consider Incorporation as a Way to Mitigate the 1099 Provision Embedded in the Health Care Bill

MADISON, Wis. (August 17, 2010)

A new tax provision buried in the health care bill passed earlier this year could mean big changes for the nation’s small businesses. The new provision requires all companies to issue 1099 tax forms not just to contract workers, but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. BizFilings urges all small business owners to monitor this issue closely and reminds entrepreneurs that incorporation is one way to level the playing field when the deck may be stacked in favor of larger, established competitors.

“This change in taxation could hurt small businesses and independent contractors that aren’t prepared for the many changes this legislation could bring,” says Karen Kobelski, general manager of BizFilings. “Incorporating adds a layer of credibility which could be critical as companies may look to reduce the number of companies they conduct business with to reduce 1099 paperwork. Formalizing a business as a corporation or LLC may help small business owners compete on a more level playing field with larger competitors.”

Prior to this legislation, 1099s were used to track payment for services, not tangible goods and were issued to individuals, not corporations. While this rule might not have a huge impact on large corporations, small businesses and independent contractors without dedicated accounting staff could become overwhelmed.

As a leading provider of incorporation in the U.S., BizFilings is no novice when it comes to IRS compliance; each year it handles ongoing compliance for thousands of small businesses across the nation through its business filing and registered agent services. To learn more about the benefits of incorporation, including how incorporation could help position small business against larger competitors, visit the BizFilings.com online Learning Center.

About BizFilings

BizFilings is a full-service, online incorporation service provider, offering small-business owners a fast, easy and economical way to form a corporation, limited liability company (LLC) or other business structure online or by phone. BizFilings also offers a full range of business filing and compliance products, including nationwide Registered Agent Service, helping keep businesses in compliance with state regulations. BizFilings can be found online at www.BizFilings.com. BizFilings is a part of Wolters Kluwer, www.wolterskluwer.com, a leading global information services company. Wolters Kluwer had 2009 annual revenues of €3.4 billion ($4.8 billion/£3.0 billion); employs approximately 19,300 people worldwide; and maintains operations in over 40 countries across Europe, North America, Asia Pacific and Latin America.